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It’s 2023, and the nearly 250-year-old Birkenstock’s catalogue is just as relevant among the fashion mainstream as with the tie-dye-wearing folks who adopted the leather-and-cork sandals decades before TikTok did. Its Arizona sandal even landed a cameo in Barbie, one of the year’s biggest blockbusters. Now, the company is set to go public with a hefty valuation.
A combination of rich brand heritage, proven unerring product quality and steady, profitable growth has buoyed Birkenstock’s status over the course of its run. The German footwear manufacturer, which sold a majority stake to LVMH-backed private equity firm L Catterton in 2021, is expected to launch an initial public offering (IPO) as soon as September, with the company valued between $8 and $10 billion, according to Bloomberg and the Financial Times, and adjusted earnings of €394 million ($434 million) last year.
Birkenstock would be among just a handful of fashion and luxury brands to go public in the last 18 months, including Lanvin which floated in December 2022 and Israeli beauty retailer Oddity Tech, also an L Catterton venture, this July. Oddity, for one, was considered a “home run” for L Catterton, which invested $50 million in the company that is now valued at $900 million. Could lightning strike twice?
Thomaï Serdari, a strategist in luxury marketing and branding and director of NYU Stern’s fashion and luxury MBA programme, speculates as much, saying that L Catterton has plans to grow Birkenstock even more, for which it needs the funds the IPO will bring in and with which its leadership can plan the next phase of growth, all while ensuring that investors will get their returns.
“Birkenstock has been around for so long because it has refused to cater to fashion whims, and that’s a strong characteristic in today’s market,” says GQ’s style commerce editor Avidan Grossman. “This brand has so much authenticity and isn’t willing to compromise on that for the sake of flash-in-the-pan trends.”
Time-tested and steeped in heritage, Birkenstock’s valuation has been boosted by its status as a legacy brand, according to NYU Stern’s Serdari — especially across today’s financial landscape.
“Right now, it’s fashionable [for Wall Street] to look at companies that have a unique heritage and that have grown through manufacturing that takes place in the Western world,” says Serdari. Birkenstock was founded in Germany and manufactures there to this day. “This is exactly where the market is right now. Everyone is working on reshoring their business, especially following the pandemic and all the supply chain issues that ensued. Brands that are born in Europe or the US and continue manufacturing close to their place of origin have achieved higher brand equity.”
Serdari offers the example of Zegna, the 113-year-old Italian luxury brand and Thom Browne owner, which debuted on the New York Stock Exchange in December 2021 and saw shares rise 8 per cent in its first week on Wall Street. Shares are now up 44 per cent over the last year.
“I wouldn’t be surprised if this became the main theme of the next round of IPOs,” says Serdari. “Even Wall Streeters fall for a good story. Heritage brands can offer exactly that, plus much more.”
After all, consumers are demanding it. Recent data from market research firm Civic Science has found that 40 per cent of US adults say that nostalgia — the kind a legacy brand represents — drives their fashion purchases to at least some extent. Michelle Gabriel, a social impact and sustainability strategist and a professor of sustainable fashion strategy at Glasgow Caledonian New York College (GCNYC), notes that American startups understand this implicitly, and tend to approximate heritage that mimics the storied pedigree toward which shoppers are gravitating.
This shows in the marketplace. Consider Allbirds, the direct-to-consumer (DTC) footwear company that launched in 2016, and despite putting forward a successful IPO effort in November 2021, has seen its stock dip 96 per cent since going public. With just five years in business and a subsequent lack of brand history, Allbirds wasn’t fully proven on the market, and it showed: in its first full year as a public company, it lost more than $100 million.
Birkenstock’s commitment to function — not unlike Allbirds’s — took centuries to finally be considered cool. Comfort is no longer the third rail in fashion, and Birkenstock is cashing in.
“Birkenstock is at this sweet spot where it’s tapping into a lot of these subconscious trends,” says GQ’s Grossman. “It hasn’t really innovated on its essential products in the decades it’s been around. It sticks to its guns in making high-quality, comfortable shoes that, for various reasons, ended up in the crosshairs of the fashion radar.”
Grossman believes that much of this can be attributed to the company’s core collection of high-fashion collaborations, which range from Dior to Valentino and have done well to cement Birkenstock as a runway-worthy staple. It’s harder than ever to pull off a collaboration that doesn’t seem like it was concocted by a group of marketing executives to stir up a frenzy of chatter online, he says. But, Birkenstock can collaborate with niche fashion darlings like Rick Owens and Jil Sander, and all parties come across as cooler because of it.
“Birkenstock is not purporting to be fashionable,” says GCNYC’s Gabriel. “It has done the magical thing that many brands always hope to do, which is hold onto its original customer while transforming. It’s almost like it added a facet of its business on top of the existing business, which has really supported its growth and the IPO.”
Maintaining the magic
Looking ahead, Birkenstock is not automatically set up for success should its IPO transpire. Gabriel finds that post-IPO, fashion companies may find themselves experiencing a downward pressure on internal costs that can, ultimately, lead to poorer quality over time. This may not present as an issue for younger, Silicon Valley-backed companies that, Gabriel says, may be more intently concerned with building short-term outcomes for stakeholders. However, a heritage brand like Birkenstock can’t afford to compromise on quality.
“Birkenstock has to really, really cling to its identity,” says Gabriel. “Its identity is a guiding force in how to run that business. If Birkenstock can continue to use that as its North Star and continue to pursue its other layers of business while cleverly partnering without oversaturation, it has a lot of longevity in the business model in which it’s currently operating.”
Its relationships, too, are not to be overlooked. Birkenstock is one of the oldest active companies with German roots, operating 16 operational sites across the country and manufacturing almost exclusively in its own production facilities. As the largest employer of the German shoe industry, its owned, local manufacturing is key to the Birkenstock cult of personality, though counts international sourcing partners, including its leather tanneries in Northern Italy. In the brand’s sustainability manifesto, Birkenstock owes its “impressive product quality and durability” to this “exceptionally high degree of vertical integration”, alongside “extensive monitoring of the supply chain, from the purchasing of raw materials through to delivery of the finished product”.
Birkenstock has been equally judicious when it comes to its retail partners, which sell its products in over 100 countries. In 2016, the company’s US operations famously pulled all its products from Amazon, saying the significant number of counterfeit Birkenstocks on the platform were hurting the Birkenstock brand.
Gabriel believes that if Birkenstock continues to prioritise its European craftsmanship, in tandem with its heritage, quality, and collaborations, as a public company, “then everyone wins, including all the people who just want money”.
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